2015 Permian Basin Playbook

The 2015 Permian Basin Shale Plays Report

Virtually all oil production in the southwestern region of the U.S. comes from the Permian Basin. Since 2013, production in the Permian has significantly grown to more than 1.9 MMbbl/d and is anticipated to grow to more than 2.4 MMbbl/d by 2025. Spraberry, Bone Spring and Wolfcamp contribute to the bulk of total production. Apache Corp., Chevron and Occidental Petroleum remain the main acreage holders in the Permian Basin. Stratas Advisors, a Hart Energy Company, has observed several operators increasing lateral lengths between 15% and 50%, increasing average stages per well by about 30% and increasing the amount of proppant per well between 30% and 70%, all while reducing well costs by 10% to 30% in the Midland and Delaware basins ...

Gain a comprehensive insight into the Permian Basin shale formations:

Know the top producing areas, production forecasts and top acreage holders, along with acquisitions and divestitures

Learn about the infrastructure issues, effective technologies and midstream activity—and how operators are maximizing productivity

TABLE OF CONTENTS

06 | OVERVIEWPlenty of Pluck in the PermianThe quality of the rocks keeps Permian operators undeterred during a time of lower prices.

12 | KEY PLAYERSLess is More in the Permian BasinFewer rigs don’t necessarily mean less production in the shale play that has producers flocking to the active and growing region.

44 | MIDSTREAMPermian RisingOnce considered over-the-hill, the Permian Basin is one of the most active midstream plays.

54 | PRODUCTION FORECASTPermian Production Continues to Buck the TrendStacked formations and lower well costs continue to show promise as operators increase production.

62 | REFERENCESAdditional Information on the Permian BasinFor more details on the Permian Basin, consult these selected sources.

Preview - Page 13 | Key Players

Less is More in the Permian Basin

Fewer rigs don’t necessarily mean less production in the shale play that has producers flocking to the active and growing region.

The Permian Basin seems to be defying the odds as daring operators cast their bets on the same technology that has made other shale plays, such as the Eagle Ford, Bakken and Utica shales, hot areas for oil and gas production in better times. This has given new life to the well-established Permian Basin, a 250-mile by 300-mile area of West Texas and the southeastern portion of New Mexico. The play, centered in the Midland area of West Texas, has become the largest shale opportunity in the U.S. by far.

While the pace of production from most U.S. shale basins is holding steady or slowing this year as producers cut budgets, the Permian Basin is responsible for leading what growth is occurring, according to the Energy Information Administration (EIA).

Permian legacy oil production has remained steady throughout 2015 at about a 70,000-bbl/d decline rate, but that reduction is offset by an estimated 94,000 bbl/d in new oil production from new wells in the Permian, according to the EIA’s monthly Drilling Productivity Report in September.

Operators are taking advantage of liquids-rich shale by transitioning more of their efforts to horizontal drilling, and one—Pioneer Natural Resources—decided in 2015 to completely commit to the drilling process, shutting down its vertical program entirely.

Thanks to the Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso and Delaware formations, the region is one of the most prolific oil-producing areas in the country. So much so, that at least three companies on the list of key players are the latest operators to flock to the area. Encana entered the Permian in late 2014, Noble Energy acquired Rosetta Resources and about 56,000 acres in July 2015, and WPX Energy closed on the purchase of RKI Exploration & Production in August 2015 with the acquisition of 92,000 net acres.

While a couple of the companies listed herein have seen declines in production, they are the exceptions, as most have not. William R. Thomas, CEO for EOG Resources, summed up the year’s activity best with this comment: “In 2015, we intend to drill fewer but better wells.”

The same goes for rigs, the EIA reported: The Permian Basin’s projected oil volumes of 2,019 Mbbl/d of oil in October 2015 are a year-overyear increase of 16%, even though its rig count has dropped by more than 50% in the same time frame.

Apache is one of the largest operators in the Permian Basin with the Wolfcamp Formation being one of the top producing areas for the company, alongside the Bone Springs and Yeso regions. Permian production at the end of second-quarter 2015 was 172,100 boe/d, a 9% increase from the first quarter of the year, according to the company’s second-quarter 2015 operational update. Oil production was 97,814 bbl/d, up from 90,536 in second-quarter 2014. The company attributes the ...